Your forecasting solution is falling short. But what are your options? Here is a brief guide to what financial planning solutions can do and which pain points they can solve.
Whether you are looking to plan long term, forecast more regularly or budget faster, automated planning solutions are built to ease the whole process of planning. The three most powerful benefits of a modern-day planning solution are in data management, automation and the move to a cloud infrastructure. Let’s take a closer look at these:
Many people talk about wanting a ‘single source of truth’. This enables a completeness of vision and drawing data from multiple systems to feeds their plans.
As businesses grow, so does the number of systems which hold and process data. Creating a plan that draws from many sources of data can be tough when there’s no joined-up approach.
The growth and development of APIs and connectors now means integrating data is much simpler than it was.
Cloud planning can pull actual data into forecast models. Data can be refreshed easily. This makes producing up-to-date reports easier and faster. Add a new date range, or filter on another dimension, refresh and the report is ready to go!
You may hear terms like Driver Based planning. This allows users to put in assumptions, which as the word suggests, allows you to attribute a value based on predefined formulas to calculate common cost of an activity.
Take a simple example, such as calculating the cost of sales. Rather than split down the costs of travel, accommodation, subsistence, etc, an ‘assumption’ of cost can be attributed to ‘a meeting’. So when budgeting, a cost centre manager can add the number of meetings for the year and a cost will be attributed. This is easier, saves time and has less margin for error.
The ability to plan against more ‘dimensions’ such as; time, people, products, location, projects and many more, enables a far greater sophistication in modelling and the ability to forecast accurate outcomes.
Instead of a flat view of results, forecasts can be more 3D. Spinning data to mix any number of combinations. More importantly, the more variables you model against the more likely you are to be accurate in your predictions.
Information can be added at a high level, whilst automation can allocate this across time and divisions as necessary. Detail can be accessed using a ‘drill down’ capability, which reduces volumes of information.
Being able to lock cells and sheets supports greater security. Security has always been a concern in Excel. Cloud planning solutions can be controlled by a central admin and enable different levels of access dependant on job role and sensitivity of information.
Being SAAS means software updates are done globally, avoiding many versions of software running across an organisation. It means as you grow or retract the software can shape to your needs, reducing costs.
The modern reporting functionality in cloud planning solutions allows for more flexible reporting. Gone are the days of strict preformatted reports.
The aim is to allow all to access the relevant information in a format which makes sense. This may mean dials and graphs pushed out to dashboards. For others, it may be in more traditional numbers format. ‘High’ level reporting with the ability to ‘drill-down’ to the detail reduces the size and volume of information being passed around the company.
Most companies re-plan at least quarterly, but would prefer to forecast more regularly. What prevents this the time it takes to forecast using tools like Excel.
The automation in cloud planning solutions allows for creating assumptions, which drive forecasting models. These ‘assumptions’ are built for your business. Examples range from calculations around common expenses to the impact of growth company-wide. This means you are not relying on complex formulas buried in spreadsheets.
WHAT IF SCENARIOS
Asking questions is at the heart of good analysis. The time it takes to create scenarios in Excel is what impacts the number of questions you can ask. Data, automation and more dimensions makes creating scenarios much easier.
Modern forecasting systems allow you to model many dimensions, time, product, services, divisions and geography. This opens up the opportunity to model across projects which typically rely on many dimensions such as resources, time, customer information, as well as costs and revenue.
The ability to ask more questions means you’re more prepared for change. Ideally, you’ve already modelled and stress tested the impact of these changes. Accurate reliable forecasts breeds trust and confidence in the finance team.
A good planning solution will provide the functionality to do simple consolidations. That is adding up and reporting the results as a group of businesses. When companies begin to cross charge and more complex adjustments are needed, then you may need functionality beyond the core planning modules.
Some planning solutions provide for this. Others don’t. The important thing is to ensure that when buying a system, that your provider understands what you need consolidation functionality for. Make sure you have a consultant implementing who knows the finance first.
Sharing and working together to produce plans means more robust outcomes and more engagement from everyone. Not to mention eradicating the need for linking and manipulating large volumes of Excel sheets.
When everyone understands the objectives of the business, It means less discord between departments and better understanding of goals, performance measures and the stresses on the business.
PROCESSES AND BUDGETING
The functionality of cloud planning solutions can speed up your budgeting by months. There is no manipulating massive tombs of data or hours needed to reconcile and defend the numbers.
Cloud means everyone is working on the same version. Assumptions reduce the calculations as well as the number of cells which need populating. The margin for error is cut as less is asked of contributors and with plain English formulas, and drill-down everyone can understand and see how numbers are calculated.
TIME FOR INSIGHTS AND ANALYSIS
Analysis is regularly cited as finance’s strength. The ability to dive into the numbers and identify trends, question results and identify possible opportunities as well as risks.
Most finance departments would love to have the space to ask more questions. The barrier is time and capability. Automation means the faster production of models. It all makes light work of the heavy lifting involved in traditional budgeting and forecasting, freeing up time to build more scenarios to model possible outcomes.
This blog is by Charlotte Taylor, director at Formulate. Formulate’s event are on the following dates, Thursday, 31st October, Central London, Thursday, 28th November, Central London, Thursday, 12th December, Birmingham, Save your place now!